February 9, 2009 / 6:34 AM / 9 years ago

Nissan to slash 20,000 jobs

<p>Nissan Motor Co cars are parked at the company's factory in Yokosuka, south of Tokyo, February 9, 2009.Toru Hanai</p>

TOKYO (Reuters) - Nissan Motor Co said it would cut 20,000 jobs and joined a growing list of automakers warning of red ink this year in what would mark its first loss since Chief Executive Carlos Ghosn took the reins a decade ago.

The spreading global recession has put consumers off buying expensive goods and even if they wanted to purchase a car, financing has become difficult due to a dearth of credit.

Saddled with excess capacity and headcount and with sales plummeting in developed markets, Japan's No.3 automaker has already taken a number of steps to cut production and staff, including through 1,200 voluntary buyouts in the United States.

With these and other measures, including reducing 12,000 jobs in Japan mostly through natural attrition, Nissan said it would reduce groupwide headcount by a total 20,000 by the end of March 2010, equivalent to 8.5 percent of the workforce.

Nissan, 44 percent-owned by Renault SA, now expects an operating loss -- its first in 14 years -- of 180 billion yen ($2 billion) for the year to March 31, instead of the 270 billion yen profit it projected three months ago. Consensus forecasts from 19 analysts had put the loss at 70 billion yen.

Nissan expects its net loss at 265 billion yen instead of a 160 billion yen profit.

"Earnings are going to be bad at automakers for some time," said Tomomi Yamashita, senior fund manager at Shinkin Asset Management.

"You've got the currency problem and the amount of production adjustment that's ahead," he said, adding that automakers could be in the red for a few more quarters.

Last week, Toyota Motor Corp tripled its annual operating loss forecast citing a faster-than-expected sales slump in the main U.S., Japanese and European markets.

Honda Motor Co also cut its forecast last month, but expects to stay in the black.

In the year to March 31, Nissan said it would produce 3,069,000 vehicles, or 20 percent less than it had planned at the start of the business year. It expects sales of 3,382,000 vehicles in 2008/09, down 10.3 percent from last year.

For the October-December third quarter, Nissan made an operating loss of 99.2 billion yen and a net loss of 83.2 billion yen. A year ago, it made an operating profit of 211.9 billion yen and net profit of 132.2 billion yen.

Third-quarter revenue fell about a third to 1.8 trillion yen.

<p>Nissan Motor Co Chief Executive Carlos Ghosn reacts during a news conference at the company headquarters in Tokyo, February 9, 2009.Yuriko Nakao</p>

COUNTER-MEASURES

With the triple blow of a credit crisis, recession and a strong yen making life tough for Japanese automakers, Nissan outlined steps to save cash and focus on a healthy balance sheet.

Specifically, Nissan said it would aim to return to positive free cash flow next business year even as it assumes the global vehicle market will shrink to 55 million units in 2009 from 62 million last year, and for the dollar to average 90 yen.

The efforts will focus on three areas: recovering profit, preserving cash and pursuing deeper savings with Renault, details of which would be outlined in three months.

To that end, Nissan said it would cut labor costs by a fifth in high-cost regions such as Japan, the United States and Europe, including by reducing high-ranking officials' salaries by 10 percent. No bonus will be paid to directors this year. Nissan will also negotiate work-sharing schemes.

Slideshow (4 Images)

Nissan plans to reduce capital spending this year by 21 percent to 384 billion yen, and a further 14 percent in 2009/10 to 330 billion yen or lower if necessary, including by suspending its participation in a factory project led by Renault in Morocco.

"All these actions and countermeasures are not merely short-term fixes," Ghosn told a news conference in Tokyo.

"They will enable our company to recover and secure a more competitive position that will benefit Nissan long after the current crisis subsides."

Ghosn said he was putting Chief Operating Officer Toshiyuki Shiga in charge of functional operations, mirroring a structure introduced at Renault in October with COO Patrick Pelata at the top. Both will continue to report to Ghosn.

SINKING VALUE

Shares in Japanese automakers have tumbled cross the board in the last year but Nissan has fallen harder than Toyota and Honda, which have healthier balance sheets and liquidity positions.

Rising debt at Renault, in which Nissan holds 15 percent, has also raised worries about any knock-on effects on the Japanese automaker.

Nissan's shares have dived more than 70 percent in the last 12 months, while Toyota and Honda are down 47 percent and 30 percent. Nissan has shed $12 billion in market value since Ghosn arrived from Renault to rescue Nissan in 1999.

Nissan's shares are the worst performer in the domestic auto sector in the year to date, falling 13 percent against a 7 percent rise in Tokyo's transport sub-index. The stock ended down 5.8 percent at 261 yen ahead of the results.

Additional reporting by David Dolan; Editing by Edwina Gibbs

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